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Republic of the PhilippinesSUPREME COURTBaguio City

THIRD DIVISION

G.R. No. 158271 April 8, 2008

CHINA BANKING CORPORATION, petitioner,vs.ASIAN CONSTRUCTION and DEVELOPMENT CORPORATION, respondent.

D E C I S I O N

AUSTRIA-MARTINEZ,J.:

Before the Court is a Petition for Review on Certiorariunder Rule 45 of the Rules ofCourt filed by petitioner China Banking Corporation (China Bank) seeking to annulthe Resolution1dated October 14, 2002 and the Resolution 2dated May 16, 2003 ofthe Court of Appeals (CA) in CA-G.R. CV No. 72175.

The facts of the case:

On July 24, 1996, China Bank granted respondent Asian Construction andDevelopment Corporation (ACDC) an Omnibus Credit Line in the amountof P90,000,000.00.3

On April 12, 1999, alleging that ACDC failed to comply with its obligations under theOmnibus Credit Line, China Bank filed a Complaint4 for recovery of sum of moneyand damages with prayer for the issuance of writ of preliminary attachment before theRegional Trial Court (RTC) of Makati, Branch 138, docketed as Civil Case No. 99-796. In the Complaint, China Bank claimed that ACDC, after collecting and receivingthe proceeds or receivables from the various construction contracts and purportedlyholding them in trust for China Bank under several Deeds of Assignment,misappropriated, converted, and used the funds for its own purpose and benefit,instead of remitting or delivering them to China Bank.5

On April 22, 1999, the RTC issued an Order6granting China Banks prayer for writ ofpreliminary attachment. Consequently, as shown in the Sheriffs Report 7 dated June14, 1999, the writ of preliminary attachment was implemented levying personal

properties of ACDC, i.e., vans, dump trucks, cement mixers, cargo trucks, utilityvehicles, machinery, equipment and office machines and fixtures.

On March 27, 2000, upon motion of China Bank, the RTC issued a SummaryJudgment8 in favor of China Bank. ACDC filed its Notice of Appeal 9dated April 24,2000.

On June 15, 2000, China Bank filed a Motion to Take Custody of Attached Propertieswith Motion for Grant of Authority to Sell to the Branch Sheriff10 with the RTC, prayingthat it be allowed to take custody of ACDCs properties for the purpose of sellingthem in an auction.11On June 20, 2000, ACDC filed its Opposition 12to the June 15,2000 Motion arguing that there can be no sale of the latters attached properties inthe absence of a final and executory judgment against ACDC.

On August 25, 2000, China Bank partially appealed the Summary Judgment for notawarding interest on one of its promissory notes.13Records of the case wereelevated to the CA.14

On April 18, 2002, China Bank filed a Motion for Leave for Grant of Authority to SellAttached Properties15 which the CA denied in the herein assailed Resolution datedOctober 14, 2002.

According to the CA, selling the attached properties prior to final judgment of theappealed case is premature and contrary to the intent and purpose of preliminaryattachment for the following reasons: first, the records reveal that the attachedproperties subject of the motion are not perishable in nature; and second, while thesale of the attached properties may serve the interest of China Bank, it will not be sofor ACDC. The CA recognized China Banks apprehension that by the time a finaljudgment is rendered, the attached properties would be worthless. However, the CAalso acknowledged that since ACDC is a corporation engaged in a constructionbusiness, the preservation of the properties is of paramount importance; and that inthe event that the decision of the lower court is reversed and a final judgmentrendered in favor ACDC, great prejudice will result if the attached properties werealready sold.

China Bank filed a Motion for Reconsideration 16which was denied in the herein

assailed CA Resolution17

dated May 16, 2003.

Hence, the present petition for review on certiorari, on the following ground:

THE HONORABLE COURT OF APPEALS RENDERED THE QUESTIONEDRESOLUTIONS (ANNEXES "A" and "B") IN A MANNER NOT IN ACCORD

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WITH THE PROVISIONS OF SECTION 11, RULE 57 OF THE RULES OFCIVIL PROCEDURE, AS IT SHELVED THE DEMANDS OF EQUITY BYARBITRARILY DISALLOWING THE SALE OF THE ATTACHEDPROPERTIES, UPHOLDING ONLY THE INTEREST OF RESPONDENT, INUTTER PARTIALITY.18

Considering that the herein assailed CA Resolutions are interlocutory in nature asthey do not dispose of the case completely but leave something to be done upon themerits,19the proper remedy should have been by way of petition for certiorariunder

Rule 65, as provided for in Section 1 (b), Rule 41 of the Rules of Court, as amendedby A.M. No. 07-7-12-SC,20 which provides:

Section 1. Subject of appeal. -An appeal may be taken from a judgment orfinal order that completely disposes of the case, or of a particular mattertherein when declared by these Rules to be appealable.

No appeal may be taken from:

x x x x

(b) An interlocutory order;

x x x x

In any of the foregoing instances, the aggrieved party may filean appropriate special civil action as provided in Rule 65. (Emphasissupplied).

The present petition for review on certiorarishould have been dismissed outright.However, in many instances, the Court has treated a petition for reviewon certiorariunder Rule 45 as a petition forcertiorariunder Rule 65 of the Rules ofCourt, such as in cases where the subject of the recourse was one of jurisdiction, orthe act complained of was perpetrated by a court with grave abuse of discretionamounting to lack or excess of jurisdiction.21 The present petition does not involveany issue on jurisdiction, neither does it show that the CA committed grave abuse ofdiscretion in denying the motion to sell the attached property.

Section 11, Rule 57 of the Rules of Court provides:

Sec. 11.When attached property may be sold after levy on attachment andbefore entry of judgment.-Whenever it shall be made to appear to the court in

which the action is pending, upon hearing with notice to both parties, that theproperty attached is perishable, or that the interests of all the parties tothe action will be subserved by the sale thereof, the court may order suchproperty to be sold at public auction in such manner as it may direct, and theproceeds of such sale to be deposited in court to abide the judgment in theaction. (Emphasis supplied)

Thus, an attached property may be sold after levy on attachment and before entry ofjudgment whenever it shall be made to appear to the court in which the action is

pending, upon hearing with notice to both parties, that the attached property isperishable orthat the interests of all the parties to the action will be subservedby the sale of the attached property.

In its Memorandum,22China Bank argues that the CAs notion of perishable property,which pertains only to those goods which rot and decay and lose their value if notspeedily put to their intended use,23 is a strict and stringent interpretation that wouldbetray the purpose for which the pre liminary attachment wasengrafted.24CitingWitherspoon v. Cross,25 China Bank invokes the definition of"perishable property" laid down by the Supreme Court of California as goods whichdecay and lose their value if not speedily put to their intended use; but where the timecontemplated is necessarily long, the term may embrace property liable merely tomaterial depreciation in value from other causes than such decay.

As stated in the Sheriffs Report26 and Notices of Levy on Properties,27 all of

ACDCs properties which were levied are personal properties consisting of usedvehicles, i.e., vans, dump trucks, cement mixers, cargo trucks, utility vehicles,machinery, equipment and office machines and fixtures. China Bank insists that theattached properties, all placed inside ACDCs stockyard located at Silang, Cavite andthe branch office in Mayamot, Antipolo City, are totally exposed to natural elementsand adverse weather conditions.28 Thus, China Bank argues, that should theattached properties be allowed to depreciate, perish or rot while the main case ispending, the attached properties will continue losing their worth thereby rendering therules on preliminary attachment nugatory.

The issue hinges on the determination whether the vehicles, office machines andfixtures are "perishable property" under Section 11, Rules 57 of the Rules of Court,which is actually one of first impression. No local jurisprudence or authoritative workhas touched upon this matter. This being so, an examination of foreign laws andjurisprudence, particularly those of the United States where some of our laws andrules were patterned after, is in order. 29

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In Mossler Acceptance Co. v. Denmark,30an order of the lower court in directing thesale of attached properties, consisting of 20 automobiles and 2 airplanes, wasreversed by the Supreme Court of Louisiana. In support of its contention thatautomobiles are perishable, Mossleroffered testimony to the effect that automobiletires tend to dry-rot in storage, batteries to deteriorate, crankcases to becomedamaged, paint and upholstery to fade, that generally automobiles tend to depreciatewhile in storage.31 Rejecting these arguments, the Supreme Court of Louisiana heldthat while there might be a depreciation in the value of a car during storage,depending largely on existing economic conditions, there would be no material

deterioration of the car itself or any of its appurtenances if the car was properly caredfor, and therefore it could not be said that automobiles were of a perishable naturewithin the intendment of the statute, which could only be invoked when the propertyattached and seized was of a perishable nature.32

With respect to the determination of the question on whether the attached officefurniture, office equipment, accessories and supplies are perishable properties, theSupreme Court of Alabama in McCreery v. Berney National Bank33discussed the"perishable" nature of the attached properties, consisting of shelving, stock ofdrygoods and a complete set of store fixtures, consisting of counters iron safe, deskand showcases, to be within the meaning of "perishable" property under the AlabamaCode which authorizes a court, on motion of either party, to order the sale, inadvance of judgment, of perishable property which had been levied on by a writ ofattachment.34

In McCreery, the Supreme Court of Alabama rejected the argument that the sale ofthe attached property was void because the term "perishable" property, as used inthe statute, meant only such property as contained in itself the elements of speedydecay, such as fruits, fish, fresh meats, etc.35 The Supreme Court of Alabama heldthat whatever may be the character of the property, if the court is satisfied that, eitherby reason of its perishable nature, or because of the expense of keeping it until thetermination of the litigation, it will prove, or be likely to prove, fruitless to the creditor,and that the purpose of its original seizure will probably be frustrated, the sale of theattached property is justified.

McCreeryapplied the doctrine in Millards Admrs. v. Hall36where the Supreme Courtof Alabama held that an attached property is perishable "if it is shown that, bykeeping the article, it will necessarily become, or is likely to become, worthless to the

creditor, and by consequence to the debtor, then it is embraced by the statute. Itmatters not, in our opinion, what the subject matter is. It may be cotton bales, livestock, hardware provisions or dry goods." Although the statute underwhich Millards was decided used the words "likely to waste or be destroyed bykeeping," instead of the word "perishable," the reasons given for the construction

placed on the statute apply equally to the Alabama Code which uses the term"perishable."37

In the Motion for Leave for Grant of Authority to Sell Attached Properties38 filed beforethe CA, China Bank alleged that the attached properties are placed in locationswhere they are totally exposed to the natural elements and adverse weatherconditions since their attachment in 1999;39 that as a result, the attached propertieshave gravely deteriorated with corrosions eating them up, with weeds germinatingand growing thereon and their engines and motors stock up;40 and that the same

holds true to the office furniture, office equipment, accessories and supplies.41Noevidence, however, were submitted by China Bank to support and substantiate theseclaims before the CA.

Notably, in the Petition filed before the Court, China Bank, for the first time, includedas annexes,42photographs of the attached properties which were alleged to berecently taken, in an attempt to convince the Court of the deteriorated condition of theattached properties.

The determination on whether the attached vehicles are properly cared for, and theburden to show that, by keeping the attached office furniture, office equipment andsupplies, it will necessarily become, or is likely to become, worthless to China Bank,and by consequence to ACDC, are factual issues requiring reception of evidencewhich the Court cannot do in a petition for certiorari. Factual issues are beyond the

scope ofcertioraribecause they do not involve any jurisdictional issue.43

As a rule, only jurisdictional questions may be raised in a petition for certiorari,including matters of grave abuse of discretion which are equivalent to lack ofjurisdiction.44The office of the writ of certiorari has been reduced to the correction ofdefects of jurisdiction solely and cannot legally be used for any other purpose.45

Certiorari is truly an extraordinary remedy and, in this jurisdiction, its use is restrictedto truly extraordinary cases - cases in which the action of the inferior court is whollyvoid; where any further steps in the case would result in a waste of time and moneyand would produce no result whatever; where the parties, or their privies, would beutterly deceived; where a final judgment or decree would be nought but a snare anddelusion, deciding nothing, protecting nobody, a judicial pretension, a recordedfalsehood, a standing menace. It is only to avoid such results as these that a writ ofcertiorari is issuable; and even here an appeal will lie if the aggrieved party prefers toprosecute it.46

Moreover, the Court held in JAM Transportation Co., Inc. v. Flores47that it is well-settled, too well-settled to require a citation of jurisprudence, that this Court does not

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make findings of facts specially on evidence raised for the first time on appeal.48 TheCourt will not make an exception in the case at bar. Hence, the photographs of theattached properties presented before the Court, for the first time on appeal, cannotbe considered by the Court.

China Bank argues that if the CA allowed the attached properties to be sold,whatever monetary value which the attached properties still have will be realized andsaved for both parties.49 China Bank further claims that should ACDC prevail in thefinal judgment50of the collection suit, ACDC can proceed with the bond posted by

China Bank.51 The Court finds said arguments to be specious and misplaced.

Section 4, Rule 57 of the Rules of Court provides:

Section 4. Condition of applicants bond. - The party applying for the ordermust thereafter give a bond executed to the adverse party in the amountfixed by the court in its order granting the issuance of the writ, conditionedthat the latter will pay all the costs which may be adjudged to the adverseparty and all the damages which he may sustain by reason of theattachment, if the court shall finally adjudge that the applicant was notentitled thereto.

It is clear from the foregoing provision that the bond posted by China Bank answersonly for the payment of all damages which ACDC may sustain if the court shall finallyadjudge that China Bank was not entitled to attachment. The liability attaches if "theplaintiff is not entitled to the attachment because the requirements entitling him to thewrit are wanting," or "if the plaintiff has no right to the attachment because the factsstated in his affidavit, or some of them are untrue." 52 Clearly, ACDC can only claimfrom the bond for all the damages which it may sustain by reason of the attachmentand not because of the sale of the attached properties prior to final judgment.

Sale of attached property before final judgment is an equitable remedy provided forthe convenience of the parties and preservation of the property.53To repeat, theCourt finds that the issue of whether the sale of attached properties is for theconvenience of the parties and that the interests of all the parties will be subservedby the said sale is a question of fact. Again, the foregoing issue can only be resolvedupon examination of the evidence presented by both parties which the Court cannotdo in a petition forcertiorariunder Rule 65 of the Rules of Court.

WHEREFORE, the petition is DENIED. The assailed Resolutions of the Court ofAppeals dated October 14, 2002 and May 16, 2003 in CA-G.R. CV No. 72175 arehereby AFFIRMED.

G.R. No. 123358 February 1, 2000

FCY CONSTRUCTION GROUP, INC., and FRANCIS C. YU, petitioners,vs.THE COURT OF APPEALS, THE HON. JOSE C. DE LA RAMA, Presiding Judge,Branch 139, Regional Trial Court, NCJR, Makati City, Metro-Manila, and LEYCONSTRUCTION AND DEVELOPMENT CORPORATION,respondents.

YNARES-SANTIAGO, J.:

On June 29, 1993, private respondent Ley Construction and DevelopmentCorporation filed a Complaint for collection of a sum of money with application forpreliminary attachment against petitioner FCY Construction Group, Inc. and FrancisC. Yu with the Makati Regional Trial Court which was docketed as Civil Case No. 93-2112. Private respondent alleged that it had a joint venture agreement with petitionerFCY Construction Group, Inc. (wherein petitioner Francis C. Yu served as President)

over the Tandang Sora Commonwealth Flyover government project, for which it hadprovided funds and construction materials. The Complaint was filed in order tocompel petitioners to pay its half share in the collections received in the project aswell as those yet to be received therein. In support of its application for a writ ofattachment, private respondent alleged that petitioners were guilty of fraud inincurring the obligation and had fraudulently misapplied or converted the money paidthem, to which it had an equal share.

On July 6, 1993, following an ex-parte hearing, the lower court issued an Order forthe issuance of a writ of preliminary attachment, conditioned upon the filing of aP7,000,000.00 attachment bond.

Petitioners moved for the lifting of the writ of preliminary attachment on the followinggrounds: (1) the attachment was heard, issued and implemented even before service

of summons upon them; (2) failure of the attaching officer to serve a copy of theaffidavit of merit upon them; and (3) that there was no fraud in incurring theobligation. As an alternative prayer in their Motion, petitioners prayed that theattachment be limited to their receivables with the Department of Public Works andHighways. This alternative prayer was later withdrawn by petitioners in aManifestation and Motion.

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On May 25, 1994, the lower court issued another Order denying petitioners' Motion toLift Attachment.1 It, however, reduced and confined the attachment to receivablesdue petitioners from the Tandang Sora Commonwealth Flyover project.

Subsequently, petitioners filed a Motion for Reconsideration 2 as well as an OmnibusMotion for Leave to file Amended Answer and/or to delete Francis C. Yu as party-defendant.3

With the denial of both Motions by the lower court on September 4, 1994, 4 petitioners

filed a Petition forCertioraribefore the Court of Appeals on September 16, 1994.5 ThePetition was, however, denied on July 31, 1995; 6 so was petitioners' Motion forReconsideration.7

Hence, the instant Petition.

It is evident that the questioned writ of attachment was anchored upon Section 1(d),Rule 57 of the Revised Rules of Court, to wit

Sec. 1.Grounds upon which attachment may issue. A plaintiff or anyproper party may, at the commencement of the action or at any timethereafter, have the property of the adverse party attached as security for thesatisfaction of any judgment that may be recovered in the following cases:

x x x x x x x x x

(d)In an action against a party who has been guilty of a fraud in contractingthe debt or incurring the obligation upon which the action is brought, or inconcealing or disposing of the property for the taking, detention or conversionof which the action is brought;

x x x x x x x x x

Petitioners, however, insist that the writ of preliminary attachment was irregularlyissued inasmuch as there was no evidence of fraud in incurring the obligations suedupon.

In support of their stand, petitioners alleged that private respondent's principalwitness admitted that it was the Department of Public Works and Highways (DPWH)that induced it to deliver materials and cash for the Tandang Sora CommonwealthFlyover project, to wit

COURT:Now . . . as of January 5, 1993 you delivered to him (referring todefendant FCY corporation) in cash and in kind amounting to Fifteen MillionPesos (P15,000,000,00), now why did you keep on delivering cash andmaterials to him if you were not paid a single centavo?

A &nsbp Because of every need for the project, and the Public Works off icial assuredme that I will be given a new project after the Tandang Sora will be finished.

Q &nsbp Who is this public official that promised you?

A &nsbp Director Pendosa, Teodoro Encarnacion and Secretary de Jesus yourHonor. (TSN, 6 July 1993, pp. 47-48).

x x x x x x x x x

Q &nsbp What about these officials of the Department of Public Highways, whatwould they do to project their sub alleged project?

A &nsbp Secretary de Jesus is no longer connected there, your Honor.

Q &nsbp At the time?

A &nsbp At that time, he resigned.

Q &nsbp Before he resigned.

A &nsbp He gave me assurance that they will soon give assurance, they will soongive me another project . . . (TSN, 6 July 1993, p. 55)8

A cursory reading of the above-cited testimony, however, readily shows that saidreassurance from the DPWH officials came, not at the inception of the obligation orcontract, but during its performance. On the other hand, the fraud of which petitionersare accused of and which was the basis for the issuance of the questionedattachment, is fraud alleged to have been committed upon contracting the obligationsued upon. Thus, petitioners' argument that "the inducement was the mouth-watering

temptation of a DPWH promise of a "new project after the Tandang Sora Flyoverproject will be finished" is clearly off-tangent as such inducement, if any, came not atthe inception of the obligation.

Similarly, petitioners' arguments that it was private respondent who admittedlyprepared the letter embodying the alleged joint venture agreement9 and had

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petitioner Francis Yu sign it must fail. The written agreement referred to was signedby petitioner Francis Yu only on January 5, 1993, long after the project hadcommenced. Thus, it was only a written confirmation of an arrangement that hadalready been existing and operational. Similarly then, such written confirmation didnot occur at the inception of the obligation sued upon.

In Liberty Insurance Corporation vs. Court Appeals,10 this Court, discussing Section1(d), Rule 57, cautioned as follows

To sustain an attachment on this ground, it must be shown that the debtor incontracting the debt or incurring the obligation intended to defraud thecreditor. The fraud must relate to the execution of the agreement and musthave been the reason which induced the other party into giving consentwhich he would not have otherwise given. To constitute a ground forattachment in Section 1 (d), Rule 57 of the Rules of Court, fraud should becommitted upon contracting the obligation sued upon. A debt is fraudulentlycontracted if at the time of contracting it the debtor has a preconceived planor intention not to pay, as it is in this case. Fraud is a state of mind and neednot be proved by direct evidence but may be inferred from the circumstancesattendant in each case. (Republic v. Gonzales, 13 SCRA 633).

From the foregoing, therefore, the alleged inducement by the DPWH officials uponprivate respondent as well as the circumstances surrounding the execution of the

joint venture agreement, both appear immaterial as they were not committed uponcontracting the obligation sued upon but occurred long after the obligation has beenestablished.

The fact that petitioners have paid a substantial amount of money to privaterespondent cannot save the day for them either. As per their own accounting, suchpayments were for accounts payable for labor supplied, construction materials andcash advances.11 It is not denied that no payment of profits has been given to privaterespondent, which is precisely what it issuing for.

Finally, considering that the writ of preliminary attachment has been issued onaccount of allegations of fraud in contracting the obligation upon which the action isbrought petitioners' efforts to have the writ of preliminary attachment dissolved on theground that it was improperly or irregularly issued is in vain. Indeed, in LibertyInsurance Corporation, supra, which cited Mindanao Savings and Loan

Assoc. vs. Court of Appeals (172 SCRA 480), we ruled

. . ., when the preliminary attachment is issued upon a ground which is at thesame time the applicant's cause of action: e.g., . . . an action against a party

who has been guilty of fraud in contracting the debtor incurring the obligationupon which the action is brought, the defendant is not allowed to file a motionto dissolve the attachment under Section 13 of Rule 57 by offering to showthe falsity of the factual averments in the plaintiffs application and affidavitson which the writ was based and consequently that the writ based thereinhad been improperly or irregularly issued the reason being that thehearing on such motion for dissolution of the writ would be tantamount to atrial on the merits. In other words, the merits of the action would be ventilatedat a mere hearing of a motion; instead of the regular trial. Therefore, when

the writ of attachment is of this nature, the only way it can be dissolved is bya counterbond.

We now come to the issue of whether or not petitioner Francis Yu should remain asparty-defendant. Petitioners argue that since the transactions were corporation tocorporation only, petitioner Francis Yu should be dropped as party-defendantconsidering the hornbook law that corporate personality is a shield against personalliability of its officers. We agree that petitioner Francis Yu cannot be made liable inhis individual capacity if he indeed entered into and signed the contract in his officialcapacity as President, in the absence of stipulation to that effect, due to thepersonality of the corporation being separate and distinct from the personscomposing it.12 However, while we agree that petitioner Francis Yu cannot be heldsolidarily liable with petitioner corporation merely because he is the President thereofand was involved in the transactions with private corporation, we also note that there

exists instances when corporate officers may be held personally liable for corporateacts. Such exceptions were outlined in Tramat Mercantile, Inc. vs. Court ofAppeals,13 as follows

Personal liability of a corporate director, trustee or officer along (although notnecessarily) with the corporation may so validly attach, as a rule, only when

1.He assents (a) to a patently unlawful act of the corporation, or (b) for badfaith or gross negligence in directing its affairs, or (c) for conflict of interest,resulting in damages to the corporation, its stockholders or other persons;

2.He consents to the issuance of watered down stocks or who, havingknowledge thereof, does not forthwith file with the corporate secretary his

written objection thereto;

3.He agrees to hold himself personally and solidarily liable with thecorporation; or

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4.He is made, by a specific provision of law, to personally answer for hiscorporate action.

The attendance of these circumstances, however, cannot be determined at this stageand should properly be threshed out during the trial on the merits. Stated differently,whether or not petitioner Francis Yu should be held personally and solidarily liablewith petitioner corporation is a matter that should be left to the trial court's discretion,dependent as it is on evidence during trial.

WHEREFORE, in view of the foregoing, the instant Petition is hereby DISMISSED.No pronouncement as to costs.1wphi1.nt

G.R. No. 144740 August 31, 2005

SECURITY PACIFIC ASSURANCE CORPORATION, Petitioners,vs.THE HON. AMELIA TRIA-INFANTE, In her official capacity as Presiding Judge,Regional Trial Court, Branch 9, Manila; THE PEOPLE OF THE PHILIPPINES,represented by Spouses REYNALDO and ZENAIDA ANZURES; and REYNALDOR. BUAZON, In his official capacity as Sheriff IV, Regional Trial Court, Branch 9,Manila, Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a petition for review on certiorari, assailing the Decision1andResolution2of the Court of Appeals in CA-G.R. SP No. 58147, dated 16 June 2000and 22 August 2000, respectively. The said Decision and Resolution declared thatthere was no grave abuse of discretion on the part of respondent Judge in issuing theassailed order dated 31 March 2000, which was the subject in CA-G.R. SP No.58147.

THE FACTS

The factual milieu of the instant case can be traced from this Courts decision in G.R.

No. 106214 promulgated on 05 September 1997.

On 26 August 1988, Reynaldo Anzures instituted a complaint against TeresitaVillaluz (Villaluz) for violation of Batas Pambansa Blg. 22. The criminal informationwas brought before the Regional Trial Court, City of Manila, and raffled off to Branch

9, then presided over by Judge Edilberto G. Sandoval, docketed as Criminal CaseNo. 89-69257.

An Ex-Parte Motion for Preliminary Attachment3 dated 06 March 1989 was filed byReynaldo Anzures praying that pending the hearing on the merits of the case, a Writof Preliminary Attachment be issued ordering the sheriff to attach the properties ofVillaluz in accordance with the Rules.

On 03 July 1989, the trial court issued an Order4 for the issuance of a writ of

preliminary attachment "upon complainants posting of a bond which is hereby fixedat P2,123,400.00 and the Courts approval of the same under the conditionprescribed by Sec. 4 of Rule 57 of the Rules of Court."

An attachment bond 5 was thereafter posted by Reynaldo Anzures and approved bythe court. Thereafter, the sheriff attached certain properties of Villaluz, which wereduly annotated on the corresponding certificates of title.

On 25 May 1990, the trial court rendered a Decision 6on the case acquitting Villaluzof the crime charged, but held her civilly liable. The dispositive portion of the saiddecision is reproduced hereunder:

WHEREFORE, premises considered, judgment is hereby rendered ACQUITTING the

accused TERESITA E. VILLALUZ with cost de oficio. As to the civil aspect of thecase however, accused is ordered to pay complainant Reynaldo Anzures the sum ofTWO MILLION ONE HUNDRED TWENTY THREE THOUSAND FOUR HUNDRED(P2,123,400.00) PESOS with legal rate of interest from December 18, 1987 until fullypaid, the sum of P50,000.00 as attorneys fees and the cost of suit.7

Villaluz interposed an appeal with the Court of Appeals, and on 30 April 1992, thelatter rendered its Decision,8 the dispositive portion of which partly reads:

WHEREFORE, in CA-G.R. CV No. 28780, the Decision of the Regional Trial Court ofManila, Branch 9, dated May 25, 1990, as to the civil aspect of Criminal Case No. 89-69257, is hereby AFFIRMED, in all respects.

The case was elevated to the Supreme Court (G.R. No. 106214), and during its

pendency, Villaluz posted a counter-bond in the amount of P2,500,000.00 issued bypetitioner Security Pacific Assurance Corporation.9Villaluz, on the same date10of thecounter-bond, filed an Urgent Motion to Discharge Attachment. 11

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On 05 September 1997, we promulgated our decision in G.R. No. 106214,affirming in toto the decision of the Court of Appeals.

In view of the finality of this Courts decision in G.R. No. 106214, the privatecomplainant moved for execution of judgment before the trial court.12

On 07 May 1999, the trial court, now presided over by respondent Judge, issued aWrit of Execution.13

Sheriff Reynaldo R. Buazon tried to serve the writ of execution upon Villaluz, but thelatter no longer resided in her given address. This being the case, the sheriff sent aNotice of Garnishment upon petitioner at its office in Makati City, by virtue of thecounter-bond posted by Villaluz with said insurance corporation in the amountofP2,500,000.00. As reported by the sheriff, petitioner refused to assume itsobligation on the counter-bond it posted for the discharge of the attachment made byVillaluz.14

Reynaldo Anzures, through the private prosecutor, filed a Motion to Proceed withGarnishment,15which was opposed by petitioner16contending that it should not beheld liable on the counter-attachment bond.

The trial court, in its Order dated 31 March 2000,17 granted the Motion to Proceedwith Garnishment. The sheriff issued a Follow-Up of Garnishment 18 addressed to thePresident/General Manager of petitioner dated 03 April 2000.

On 07 April 2000, petitioner filed a Petition for Certiorariwith Preliminary Injunctionand/or Temporary Restraining Order19 with the Court of Appeals, seeking thenullification of the trial courts order dated 31 March 2000 granting the motion toproceed with garnishment. Villaluz was also named as petitioner. The petitionerscontended that the respondent Judge, in issuing the order dated 31 March 2000, andthe sheriff committed grave abuse of discretion and grave errors of law in proceedingagainst the petitioner corporation on its counter-attachment bond, despite the factthat said bond was not approved by the Supreme Court, and that the condition bywhich said bond was issued did not happen.20

On 16 June 2000, the Court of Appeals rendered a Decision,21 the dispositive portion

of which reads:

WHEREFORE, premises considered, the Court finds no grave abuse of discretion onthe part of respondent judge in issuing the assailed order. Hence, the petition isdismissed.

A Motion for Reconsideration22 was filed by petitioner, but was denied for lack ofmerit by the Court of Appeals in its Resolution23dated 22 August 2000.

Undeterred, petitioner filed the instant petition under Rule 45 of the 1997 Rules ofCivil Procedure, with Urgent Application for a Writ of Preliminary Injunction and/orTemporary Restraining Order.24

On 13 December 2000, this Court issued a Resolution25 requiring the privaterespondents to file their Comment to the Petition, which they did. Petitioner was

required to file its Reply26 thereafter.

Meanwhile, on 17 January 2001, petitioner and the spouses Reynaldo and ZenaidaAnzures executed a Memorandum of Understanding (MOU).27 In it, it was stipulatedthat as of said date, the total amount garnished from petitioner had amountedto P1,541,063.85, and so the remaining amount still sought to be executedwasP958,936.15.28 Petitioner tendered and paid the amount of P300,000.00 uponsigning of the MOU, and the balance of P658,936.15 was to be paid in installmentat P100,000.00 at the end of each month from February 2001 up to July 2001. At theend of August 2001, the amount of P58,936.00 would have to be paid. This wouldmake the aggregate amount paid to the private respondents P2,500,000.00. 29 Therewas, however, a proviso in the MOU which states that "this contract shall not beconstrued as a waiver or abandonment of the appellate review pending before theSupreme Court and that it will be subject to all such interim orders and final outcome

of said case."

On 13 August 2001, the instant petition was given due course, and the parties wereobliged to submit their respective Memoranda.30

ISSUES

The petitioner raises the following issues for the resolution of this Court:

Main Issue - WHETHER OR NOT THE COURT OF Appeals committed reversibleerror in affirming the 31 march 2000 order of public respondent judge which allowedexecution on the counter-bond issued by the petitioner.

Corollary Issues (1) WHETHER OR NOT THE COURT OF APPEALSCORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY OFVILLALUZ WAS DISCHARGED WITHOUT NEED OF COURT APPROVAL OF THECOUNTER-BOND POSTED; and (2) WHETHER OR NOT THE COURT OFAPPEALS CORRECTLY RULED THAT THE ATTACHMENT ON THE PROPERTY

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OF VILLALUZ WAS DISCHARGED BY THE MERE ACT OF POSTING THECOUNTER-BOND.

THE COURTS RULING

Petitioner seeks to escape liability by contending, in the main, that the writ ofattachment which was earlier issued against the real properties of Villaluz was notdischarged. Since the writ was not discharged, then its liability did not accrue. Thealleged failure of this Court in G.R. No. 106214 to approve the counter-bond and to

cause the discharge of the attachment against Villaluz prevented the happening of acondition upon which the counter-bonds issuance was premised, such that petitionershould not be held liable thereon.31

Petitioner further asserts that the agreement between it and Villaluz is not asuretyship agreement in the sense that petitioner has become an additional debtor inrelation to private respondents. It is merely waiving its right of excussion32that wouldordinarily apply to counter-bond guarantors as originally contemplated in Section 12,Rule 57 of the 1997 Rules.

In their Comment,33 the private respondents assert that the filing of the counter-bondby Villaluz had already ipso facto discharged the attachment on the properties andmade the petitioner liable on the bond. Upon acceptance of the premium, there wasalready an express contract for surety between Villaluz and petitioner in the amount

ofP2,500,000.00 to answer for any adverse judgment/decision against Villaluz.

Petitioner filed a Reply34 dated 09 May 2001 to private respondents Comment,admitting the binding effect of the bond as between the parties thereto. What it didnot subscribe to was the theory that the attachment was ipso facto or automaticallydischarged by the mere filing of the bond in court. Such theory, according topetitioner, has no foundation. Without an order of discharge of attachment andapproval of the bond, petitioner submits that its stipulated liability on said bond,premised on their occurrence, could not possibly arise, for to hold otherwise would beto trample upon the statutorily guaranteed right of the parties to contractualautonomy.

Based on the circumstances present in this case, we find no compelling reason toreverse the ruling of the Court of Appeals.

Over the years, in a number of cases, we have made certain pronouncements aboutcounter-bonds.

In Tijam v. Sibonghanoy,35 as reiterated in Vanguard Assurance Corp. v. Court ofAppeals,36we held:

. . . [A]fter the judgment for the plaintiff has become executory and the execution isreturned unsatisfied, as in this case, the liability of the bond automatically attachesand, in failure of the surety to satisfy the judgment against the defendant despitedemand therefore, writ of execution may issue against the surety to enforce theobligation of the bond.

In Luzon Steel Coporation v. Sia, et al.:37

. . . [C]ounterbonds posted to obtain the lifting of a writ of attachment is due to thesebonds being security for the payment of any judgment that the attaching party mayobtain; they are thus mere replacements of the property formerly attached, and justas the latter may be levied upon after final judgment in the case in order to realize theamount adjudged, so is the liability of the countersureties ascertainable after thejudgment has become final. . . .

In Imperial Insurance, Inc. v. De Los Angeles,38we ruled:

. . . Section 17, Rule 57 of the Rules of Court cannot be construed that an "executionagainst the debtor be first returned unsatisfied even if the bond were a solidary one,for a procedural may not amend the substantive law expressed in the Civil Code, andfurther would nullify the express stipulation of the parties that the suretys obligationshould be solidary with that of the defendant.

In Philippine British Assurance Co., Inc. v. Intermediate Appellate Court,39 we furtherheld that "the counterbond is intended to secure the payment of any judgment thatthe attaching creditor may recover in the action."

Petitioner does not deny that the contract between it and Villaluz is one of surety.However, it points out that the kind of surety agreement between them is one thatmerely waives its right of excussion. This cannot be so. The counter-bond itselfstates that the parties jointly and severally bind themselves to secure the payment ofany judgment that the plaintiff may recover against the defendant in the action. Asurety is considered in law as being the same party as the debtor in relation to

whatever is adjudged touching the obligation of the latter, and their liabilities areinterwoven as to be inseparable.40

Suretyship is a contractual relation resulting from an agreement whereby one person,the surety, engages to be answerable for the debt, default or miscarriage of another,known as the principal. The suretys obligation is not an original and direct one for the

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performance of his own act, but merely accessory or collateral to the obligationcontracted by the principal. Nevertheless, although the contract of a surety is inessence secondary only to a valid principal obligation, his liability to the creditor orpromise of the principal is said to be direct, primary and absolute; in other words, heis directly and equally bound with the principal. The surety therefore becomes liablefor the debt or duty of another although he possesses no direct or personal interestover the obligations nor does he receive any benefit therefrom.41

In view of the nature and purpose of a surety agreement, petitioner, thus, is barred

from disclaiming liability.

Petitioners argument that the mere filing of a counter-bond in this case cannotautomatically discharge the attachment without first an order of discharge andapproval of the bond, is lame.

Under the Rules, there are two (2) ways to secure the discharge of an attachment.First, the party whose property has been attached or a person appearing on hisbehalf may post a security. Second, said party may show that the order of attachmentwas improperly or irregularly issued.42The first applies in the instant case. Section12, Rule 57,43provides:

SEC. 12. Discharge of attachment upon giving counter-bond. After a writ ofattachment has been enforced, the party whose property has been attached, or the

person appearing on his behalf, may move for the discharge of the attachment whollyor in part on the security given. The court shall, after due notice and hearing, orderthe discharge of the attachment if the movant makes a cash deposit, or files acounter-bond executed to the attaching party with the clerk of the court where theapplication is made, in an amount equal to that fixed by the court in the order ofattachment, exclusive of costs. But if the attachment is sought to be discharged withrespect to a particular property, the counter-bond shall be equal to the value of thatproperty as determined by the court. In either case, the cash deposit or the counter-bond shall secure the payment of any judgment that the attaching party may recoverin the action. A notice of the deposit shall forthwith be served on the attaching party.Upon the discharge of an attachment in accordance with the provisions of thissection, the property attached, or the proceeds of any sale thereof, shall be deliveredto the party making the deposit or giving the counter-bond, or to the personappearing on his behalf, the deposit or counter-bond aforesaid standing in place of

the property so released. Should such counter-bond for any reason be found to be orbecome insufficient, and the party furnishing the same fail to file an additionalcounter-bond, the attaching party may apply for a new order of attachment.

It should be noted that in G.R. No. 106214, per our Resolution dated 15 January1997,44we permitted Villaluz to file a counter-attachment bond. On 17 February1997,45we required the private respondents to comment on the sufficiency of thecounter-bond posted by Villaluz.

It is quite palpable that the necessary steps in the discharge of an attachment upongiving counter-bond have been taken. To require a specific order for the discharge ofthe attachment when this Court, in our decision in G.R. No. 106214, had alreadydeclared that the petitioner is solidarily bound with Villaluz would be mere

surplusage. Thus:

During the pendency of this petition, a counter-attachment bond was filed bypetitioner Villaluz before this Court to discharge the attachment earlier issued by thetrial court. Said bond amounting to P2.5 million was furnished by Security PacificAssurance, Corp. which agreed to bind itself "jointly and severally" with petitioner for"any judgment" that may be recovered by private respondent against the former.46

We are not unmindful of our ruling in the case ofBelisle Investment and Finance Co.,Inc. v. State Investment House, Inc.,47 where we held:

. . . [T]he Court of Appeals correctly ruled that the mere posting of a counterbonddoes not automatically discharge the writ of attachment. It is only after hearing andafter the judge has ordered the discharge of the attachment if a cash deposit is made

or a counterbond is executed to the attaching creditor is filed, that the writ ofattachment is properly discharged under Section 12, Rule 57 of the Rules of Court.

The ruling in Belisle, at first glance, would suggest an error in the assailed ruling ofthe Court of Appeals because there was no specific resolution discharging theattachment and approving the counter-bond. As above-explained, however,consideration of our decision in G.R. No. 106214 in its entirety will readily show thatthis Court has virtually discharged the attachment after all the parties therein havebeen heard on the matter.

On this score, we hew to the pertinent ratiocination of the Court of Appeals asregards the heretofore cited provision of Section 12, Rule 57 of the 1997 Rules ofCivil Procedure, on the discharge of attachment upon giving counter-bond:

. . . The f iling of the counter-attachment bond by petitioner Villaluz has discharged theattachment on the properties and made the petitioner corporation liable on thecounter-attachment bond. This can be gleaned from the "DEFENDANTS BONDFOR THE DISSOLUTION OF ATTACHMENT", which states that Security PacificAssurance Corporation, as surety, in consideration of the dissolution of the said

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attachmentjointly and severally, binds itself with petitioner Villaluz for any judgmentthat may be recovered by private respondent Anzures against petitioner Villaluz.

The contract of surety is only between petitioner Villaluz and petitioner corporation.The petitioner corporation cannot escape liability by stating that a court approval isneeded before it can be made liable. This defense can only be availed by petitionercorporation against petitioner Villaluz but not against third persons who are notparties to the contract of surety. The petitioners hold themselves out as jointly andseverally liable without any conditions in the counter-attachment bond. The

petitioner corporation cannot impose requisites before it can be made liablewhen the law clearly does not require such requisites to befulfilled.48(Emphases supplied.)

Verily, a judgment must be read in its entirety, and it must be construed as a wholeso as to bring all of its parts into harmony as far as this can be done by fair andreasonable interpretation and so as to give effect to every word and part, if possible,and to effectuate the intention and purpose of the Court, consistent with theprovisions of the organic law.49

Insurance companies are prone to invent excuses to avoid their just obligation. 50 Itseems that this statement very well fits the instant case.

WHEREFORE, in view of all the foregoing, the Decision and Resolution of the Court

of Appeals dated 16 June 2000 and 22 August 2000, respectively, are bothAFFIRMED. Costs against petitioner.

G.R. No. 139941 January 19, 2001

VICENTE B. CHUIDIAN, petitioner,vs.SANDIGANBAYAN (Fifth Division) and the REPUBLIC OF THEPHILIPPINES, respondents.

YNARES-SANTIAGO, J.:

The instant petition arises from transactions that were entered into by the

government in the penultimate days of the Marcos administration. PetitionerVicente B. Chuidian was alleged to be a dummy or nominee of Ferdinand andImelda Marcos in several companies said to have been illegally acquired by theMarcos spouses. As a favored business associate of the Marcoses, Chuidianallegedly used false pretenses to induce the officers of the Philippine Export and

Foreign Loan Guarantee Corporation (PHILGUARANTEE), the Board ofInvestments (BOI) and the Central Bank, to facilitate the procurement andissuance of a loan guarantee in favor of the Asian Reliability Company,Incorporated (ARCI) sometime in September 1980. ARCI, 98% of which wasallegedly owned by Chuidian, was granted a loan guarantee of Twenty-FiveMillion U.S. Dollars (US$25,000,000.00).1wphi1.nt

While ARCI represented to Philguarantee that the loan proceeds would be usedto establish five inter-related projects in the Philippines, Chuidian reneged on the

approved business plan and instead invested the proceeds of the loan incorporations operating in the United States, more particularly Dynetics,Incorporated and Interlek, Incorporated. Although ARCI had received theproceeds of the loan guaranteed by Philguarantee, the former defaulted in thepayments thereof, compelling Philguarantee to undertake payments for thesame. Consequently, in June 1985, Philguarantee sued Chuidian before theSanta Clara County Superior Court,1 charging that in violation of the terms of theloan, Chuidian not only defaulted in payment, but also misused the funds byinvesting them in Silicon Valley corporations and using them for his personalbenefit.

For his part, Chuidian claimed that he himself was a victim of the systematicplunder perpetrated by the Marcoses as he was the true owner of these

companies, and that he had in fact instituted an action before the Federal Courtsof the United States to recover the companies which the Marcoses had illegallywrested from him.2

On November 27, 1985, or three (3) months before the successful people's revoltthat toppled the Marcos dictatorship, Philguarantee entered into a compromiseagreement with Chuidian whereby petitioner Chuidian shall assign and surrendertitle to all his companies in favor of the Philippine government. In return,Philguarantee shall absolve Chuidian from all civil and criminal liability, and in sodoing, desist from pursuing any suit against Chuidian concerning the paymentsPhilguarantee had made on Chuidian's defaulted loans.

It was further stipulated that instead of Chuidian reimbursing the payments made

by Philguarantee arising from Chuidian's default, the Philippine government shallpay Chuidian the amount of Five Million Three Hundred Thousand Dollars(US$5,300,000.00). Initial payment of Five Hundred Thousand Dollars(US$500,000.00) was actually received by Chuidian, as well as succeedingpayment of Two Hundred Thousand Dollars (US$200,000.00). The remainingbalance of Four Million Six Hundred Thousand Dollars (US$4,600,000.00) was to

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be paid through an irrevocable Letter of Credit (L/C) from which Chuidian woulddraw One Hundred Thousand Dollars (US$100,000.00) monthly. 3 Accordingly, onDecember 12, 1985, L/C No. SSD-005-85 was issued for the said amount by thePhilippine National Bank (PNB). Subsequently, Chuidian was able to make two(2) monthly drawings from said L/C at the Los Angeles branch of the PNB.4

With the advent of the Aquino administration, the newly-established PresidentialCommission on Good Government (PCGG) exerted earnest efforts to search andrecover money, gold, properties, stocks and other assets suspected as having

been illegally acquired by the Marcoses, their relatives and cronies.

Petitioner Chuidian was among those whose assets were sequestered by thePCGG. On May 30, 1986, the PCGG issued a Sequestration Order5 directing thePNB to place under its custody, for and in behalf of the PCGG, the irrevocableL/C (No. SSD-005-85). Although Chuidian was then residing in the United States,his name was placed in the Department of Foreign Affairs' Hold Order list.6

In the meantime, Philguarantee filed a motion before the Superior Court of SantaClara County of California in Civil Case Nos. 575867 and 577697 seeking tovacate the stipulated judgment containing the settlement between Philguaranteeand Chuidian on the grounds that: (a) Philguarantee was compelled by theMarcos administration to agree to the terms of the settlement which was highly

unfavorable to Philguarantee and grossly disadvantageous to the government;(b) Chuidian blackmailed Marcos into pursuing and concluding the settlementagreement by threatening to expose the fact that the Marcoses madeinvestments in Chuidian's American enterprises; and (c) the Aquinoadministration had ordered Philguarantee not to make further payments on theL/C to Chuidian. After considering the factual matters before it, the said courtconcluded that Philguarantee "had not carried its burden of showing that thesettlement between the parties should be set aside."7 On appeal, the SixthAppellate District of the Court of Appeal of the State of California affirmed thejudgment of the Superior Court of Sta. Clara County denying Philguarantee'smotion to vacate the stipulated judgment based on the settlement agreement. 8

After payment on the L/C was frozen by the PCGG, Chuidian filed before theUnited States District Court, Central District of California, an action against PNBseeking, among others, to compel PNB to pay the proceeds of the L/C. PNBcountered that it cannot be held liable for a breach of contract under principles ofillegality, international comity and act of state, and thus it is excused frompayment of the L/C. Philguarantee intervened in said action, raising the sameissues and arguments it had earlier raised in the action before the Santa Clara

Superior Court, alleging that PNB was excused from making payments on theL/C since the settlement was void due to i llegality, duress and fraud.9

The Federal Court rendered judgment ruling: (1) in favor of PNB excusing thesaid bank from making payment on the L/C; and (2) in Chuidian's favor bydenying intervenor Philguarantee's action to set aside the settlementagreement.10

Meanwhile, on February 27, 1987, a Deed of Transfer11 was executed betweenthen Secretary of Finance Jaime V. Ongpin and then PNB President Edgardo B.Espiritu, to facilitate the rehabilitation of PNB, among others, as part of thegovernment's economic recovery program. The said Deed of Transfer providedfor the transfer to the government of certain assets of PNB in exchange for whichthe government would assume certain liabilities of PNB. 12 Among those liabilitieswhich the government assumed were unused commercial L/C's and DeferredL/C's, including SSD-005-85 listed under Dynetics, Incorporated in favor ofChuidian in the amount of Four Million Four Hundred Thousand Dollars(US$4,400,000.00). 13

On July 30, 1987, the government filed before the Sandiganbayan Civil Case No.0027 against the Marcos spouses, several government officials who servedunder the Marcos administration, and a number of individuals known to be

cronies of the Marcoses, including Chuidian. The complaint sought thereconveyance, reversion, accounting and restitution of all forms of wealthallegedly procured illegally and stashed away by the defendants.

In particular, the complaint charged that Chuidian, by himself and/or inconspiracy with the Marcos spouses, engaged in "devices, schemes andstratagems" by: (1) forming corporations for the purpose of hiding and avoidingdiscovery of illegally obtained assets; (2) pillaging the coffers of governmentfinancial institutions such as the Philguarantee; and (3) executing the courtsettlement between Philguarantee and Chuidian which was grosslydisadvantageous to the government and the Filipino people.

In fine, the PCGG averred that the above-stated acts of Chuidian committed in

unlawful concert with the other defendants constituted "gross abuse of officialposition of authority, flagrant breach of public trust and fiduciary obligations,brazen abuse of right and power, unjust enrichment, violation of the Constitutionand laws" of the land.14

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While the case was pending, on March 17, 1993, the Republic of the Philippinesfiled a motion for issuance of a writ of attachment15 over the L/C, citing asgrounds therefor the following:

(1) Chuidian embezzled or fraudulently misapplied the funds of ARCIacting in a fiduciary capacity, justifying issuance of the writ under Section1(b), Rule 57 of the Rules of Court;

(2) The writ is justified under Section 1(d) of the same rule as Chuidian isguilty of fraud in contracting the debt or incurring the obligation uponwhich the action was brought, or that he concealed or disposed of theproperty that is the subject of the action;

(3) Chuidian has removed or disposed of his property with the intent ofdefrauding the plaintiff as justified under Section 1(c) of Rule 57; and

(4) Chuidian is residing out of the country or one on whom summons maybe served by publication, which justifies the writ of attachment prayed forunder Section 1(e) of the same rule.

The Republic also averred that should the action brought by Chuidian before theU.S. District Court of California to compel payment of the L/C prosper, inspite of

the sequestration of the said L/C, Chuidian can ask the said foreign court tocompel the PNB Los Angeles branch to pay the proceeds of the L/C. Eventually,Philguarantee will be made to shoulder the expense resulting in further damageto the government. Thus, there was an urgent need for the writ of attachment toplace the L/C under the custody of the Sandiganbayan so the same may bepreserved as security for the satisfaction of judgment in the case before saidcourt.

Chuidian opposed the motion for issuance of the writ of attachment, contendingthat:

(1) The plaintiff's affidavit appended to the motion was in form andsubstance fatally defective;

(2) Section 1(b) of Rule 57 does not apply since there was no fiduciaryrelationship between the plaintiff and Chuidian;

(3) While Chuidian does not admit fraud on his part, if ever there wasbreach of contract, such fraud must be present at the time the contract isentered into;

(4) Chuidian has not removed or disposed of his property in the absenceof any intent to defraud plaintiff;

(5) Chuidian's absence from the country does not necessarily make him anon-resident; and

(6) Service of summons by publication cannot be used to justify theissuance of the writ since Chuidian had already submitted to thejurisdiction of the Court by way of a motion to lift the freeze order filedthrough his counsel.

On July 14, 1993, the Sandiganbayan issued a Resolution ordering the issuanceof a writ of attachment against L/C No. SSD-005-85 as security for thesatisfaction of judgment.16 The Sandiganbayan's ruling was based on itsdisquisition of the five points of contention raised by the parties. On the firstissue, the Sandiganbayan found that although no separate affidavit was attachedto the motion, the motion itself contained all the requisites of an affidavit, and theverification thereof is deemed a substantial compliance of Rule 57, Section 3 of

the Rules of Court.

Anent the second contention, the Sandiganbayan ruled that there was nofiduciary relationship existing between Chuidian and the Republic, but onlybetween Chuidian and ARCI. Since the Republic is not privy to the fiduciaryrelationship between Chuidian and ARCI, it cannot invoke Section 1(b) of Rule57.

On the third issue of fraud on the part of Chuidian in contracting the loan, or inconcealing or disposing of the subject property, the Sandiganbayan held thatthere was aprima facie case of fraud committed by Chuidian, justifying theissuance of the writ of attachment. The Sandiganbayan also adopted theRepublic's position that since it was compelled to pay, through Philguarantee, the

bank loans taken out by Chuidian, the proceeds of which were fraudulentlydiverted, it is entitled to the issuance of the writ of attachment to protect its rightsas creditor.

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Assuming that there is truth to the government's allegation that Chuidian hasremoved or disposed of his property with the intent to defraud, theSandiganbayan held that the writ of attachment is warranted, applying Section1(e) of Rule 57. Besides, the Rules provide for sufficient security should theowner of the property attached suffer damage or prejudice caused by theattachment.17

Chuidian's absence from the country was considered by the Sandiganbayan tobe "the most potent insofar as the relief being sought is concerned." 18 Taking

judicial notice of the admitted fact that Chuidian was residing outside of thecountry, the Sandiganbayan observed that:

"x x x no explanation whatsoever was given by him as to his absence from thecountry, or as to his homecoming plans in the future. It may be added, moreover,that he has no definite or clearcut plan to return to the country at this juncture given the manner by which he has submitted himself to the jurisdiction of thecourt."19

Thus, the Sandiganbayan ruled that even if Chuidian is one who ordinarilyresides in the Philippines, but is temporarily living outside, he is still subject to theprovisional remedy of attachment.

Accordingly, an order of attachment20 was issued by the Sandiganbayan on July19, 1993, ordering the Sandiganbayan Sheriff to attach PNB L/C No. SSD-005-85 for safekeeping pursuant to the Rules of Court as security for the satisfactionof judgment in Sandiganbayan Civil Case No. 0027.

On August 11, 1997, or almost four (4) years after the issuance of the order ofattachment, Chuidian filed a motion to lift the attachment based on the followinggrounds:

First, he had returned to the Philippines; hence, the Sandiganbayan's "mostpotent ground" for the issuance of the writ of preliminary attachment no longerexisted. Since his absence in the past was the very foundation of theSandiganbayan's writ of preliminary attachment, his presence in the country

warrants the immediate lifting thereof.

Second, there was no evidence at all of initial fraud or subsequent concealmentexcept for the affidavit submitted by the PCGG Chairman citing mere "belief andinformation" and "not on knowledge of the facts." Moreover, this statement is

hearsay since the PCGG Chairman was not a witness to the litigated incidents,was never presented as a witness by the Republic and thus was not subject tocross-examination.

Third, Chuidian denies that he ever disposed of his assets to defraud theRepublic, and there is nothing in the records that support the Sandiganbayan'serroneous conclusion on the matter. Fourth, Chuidian belied the allegation thathe was also a defendant in "other related criminal action," for in fact, he had"never been a defendant in any prosecution of any sort in the

Philippines."21 Moreover, he could not have personally appeared in any otheraction because he had been deprived of his right to a travel document by thegovernment.

Fifth, the preliminary attachment was, in the first place, unwarranted because hewas not "guilty of fraud in contracting the debt or incurring the obligation". In fact,the L/C was not a product of fraudulent transactions, but was the result of a USCourt-approved settlement. Although he was accused of employing blackmailtactics to procure the settlement, the California Supreme Court ruled otherwise.And in relation thereto, he cites as a sixth ground the fact that all theseallegations of fraud and wrongdoing had already been dealt with in actions beforethe State and Federal Courts of California. While it cannot technically beconsidered as forum shopping, it is nevertheless a "form of suit multiplicity over

the same issues, parties and subject matter."22

These foreign judgmentsconstitute res judicata which warrant the dismissal of the case itself.

Chuidian further contends that should the attachment be allowed to continue, hewill be deprived of his property without due process. The L/C was payment toChuidian in exchange for the assets he turned over to the Republic pursuant tothe terms of the settlement in Case No. 575867. Said assets, however, hadalready been sold by the Republic and cannot be returned to Chuidian should thegovernment succeed in depriving him of the proceeds of the L/C. Since saidassets were disposed of without his or the Sandiganbayan's consent, it is theRepublic who is fraudulently disposing of assets.

Finally, Chuidian stressed that throughout the four (4) years that the preliminaryattachment had been in effect, the government had not set the case for hearing.Under Rule 17, Section 3, the case itself should be dismissed for laches owing tothe Republic's failure to prosecute its action for an unreasonable length of time.Accordingly, the preliminary attachment, being only a temporary or ancillaryremedy, must be lifted and the PNB ordered to immediately pay the proceeds ofthe L/C to Chuidian.

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Subsequently, on August 20, 1997, Chuidian filed a motion to require theRepublic to deposit the L/C in an interest bearing account.23 Annex "D"; Rollo, pp.77-79.23 He pointed out to the Sandiganbayan that the face amount of the L/Chad, since its attachment, become fully demandable and payable. However,since the amount is just lying dormant in the PNB, without earning any interest,he proposed that it would be to the benefit of all if the Sandiganbayan requiresPNB to deposit the full amount to a Sandiganbayan trust account at any bank inorder to earn interest while awaiting judgment of the action.

The Republic opposed Chuidian's motion to lift attachment, alleging thatChuidian's absence was not the only ground for the attachment and, therefore,his belated appearance before the Sandiganbayan is not a sufficient reason to liftthe attachment. Moreover, allowing the foreign judgment as a basis for the liftingof the attachment would essentially amount to an abdication of the jurisdiction ofthe Sandiganbayan to hear and decide the ill gotten wealth cases lodged beforeit in deference to the judgment of foreign courts.

In a Resolution promulgated on November 13, 1998, the Sandiganbayan deniedChuidian's motion to lift attachment.24

On the same day, the Sandiganbayan issued another Resolution denyingChuidian's motion to require deposit of the attached L/C in an interest bearing

account.25

In a motion seeking a reconsideration of the first resolution, Chuidian assailedthe Sandiganbayan's finding that the issues raised in his motion to lift attachmenthad already been dealt with in the earlier resolution dated July 14, 1993 grantingthe application for the writ of preliminary attachment based on the followinggrounds:

First, Chuidian was out of the country in 1993, but is now presently residing in thecountry.

Second, the Sandiganbayan could not have known then that his absence wasdue to the non-renewal of his passport at the instance of the PCGG. Neither was

it revealed that the Republic had already disposed of Chuidian's assets ceded tothe Republic in exchange for the L/C. The foreign judgment was not an issuethen because at that time, said judgment had not yet been issued and much lessfinal. Furthermore, the authority of the PCGG Commissioner to subscribe as aknowledgeable witness relative to the issuance of the writ of preliminary

attachment was raised for the first time in the motion to lift the attachment.Finally, the issue of laches could not have been raised then because it was theRepublic's subsequent neglect or failure to prosecute despite the passing of theyears that gave rise to laches.26

Chuidian also moved for a reconsideration of the Sandiganbayan resolutiondenying the motion to require deposit of the L/C into an interest bearing account.He argued that contrary to the Sandiganbayan's pronouncement, allowing thedeposit would not amount to a virtual recognition of his right over the L/C, for he

is not asking for payment but simply requesting that it be deposited in an accountunder the control of the Sandiganbayan. He further stressed that theSandiganbayan abdicated its bounden duty to rule on an issue when it found"that his motion will render nugatory the purpose of sequestration and freezeorders over the L/C." Considering that his assets had already been sold by theRepublic, he claimed that the Sandiganbayan's refusal to exercise its fiduciaryduty over attached assets will cause him irreparable injury. Lastly, theSandiganbayan's position that Chuidian was not the owner but a mere payee-beneficiary of the L/C issued in his favor negates overwhelming jurisprudence onthe Negotiable Instruments Law, while at the same time obliterating his righ